Are more NRIs buy­ing prop­erty in In­dia?

con­fi­dence in the real es­tate mar­ket is also im­prov­ing – not yet enough to sig­nal a re­vival, but enough to in­di­cate that the tide is slowly turn­ing which means that NRIs can now in­vest in the tra­di­tion­ally pre­ferred do­main

Ever since the In­dian ru­pee be­gan nose­div­ing, more and more NRIs (non-res­i­dent In­di­ans) have turned their fo­cus to the In­dian real es­tate mar­ket. There are good rea­sons for this. Other than the favourable ex­change rate, the new reg­u­la­tory en­vi­ron­ment driven by RE RA, Demo net is at ion and G ST have served to clear up a lot of the mis­giv­ings that kept many NRIs from in­vest­ing in prop­erty in In­dia. How­ever, that’s not all there is to it.

Most NRIs, re­gard­less of whether they are per­ma­nently sta­tioned or well-set­tled abroad, at some point en­ter­tain a fond wish to buy a home in In­dia - if not for them­selves, then for their fam­i­lies back home. Buy­ing a prop­erty is still a mark of pres­tige and ac­com­plish­ment for any In­dian, re­gard­less of where they are in the world. Nor will most NRIs ever en­tirely shed a feel­ing of re­spon­si­bil­ity to­wards their fam­i­lies back home.

As per ANAROCK’s re­cent Con­sumer Sen­ti­ment Out­look sur­vey, real es­tate con­tin­ues to the favourite in­vest­ment op­tion in In­dia for most NRIs. As many as 78% NRI re­spon­dents pre­fer real es­tate over other as­set classes - stocks, FDs, mu­tual funds etc. - largely be­cause of the charm of own­ing a prop­erty back in their coun­try of ori­gin.

NRIs from any part of the world where the lo­cal cur­rency is favourable against the ru­pee would now be in­ter­ested in buy­ing prop­er­ties here. That would in­clude NRIs in the US, most of Europe, the UK and Sin­ga­pore. Gulf-based NRIs are in any case very well dis­posed to­wards own­ing homes in In­dia - de­pend­ing on which sec­tor they work in, their work ten­ure and their pur­chas­ing power.

THE MURKY PAST OF NRI PROP­ERTY DEALS

In the past, NRIs were par­tic­u­larly vul­ner­a­ble to be­ing led astray by mis­lead­ing pro­mo­tions, le­gal faults in the prop­erty and var­i­ous other pit­falls, as they are not wired into the mar­ket as much res­i­dents can be. The times when de­vel­op­ers built and mar­keted projects aimed squarely at rel­a­tively more af­flu­ent NRIs - of­ten to the ex­clu­sion of all other as­pir­ing buy­ers - still come to mind.

This was, be­yond a doubt, a squalid prac­tice com­ing from a squalid per­spec­tive of NRIs as peo­ple with a lot of money and not enough sense. Un­for­tu­nately, this per­cep­tion was re­in­forced by count­less hasty im­pulse pur­chases by NRIs which went south - some­times ter­mi­nally. Many of such projects never made it to the fin­ish line, re­sult­ing in mas­sive losses for NRIs who had made brief trips to In­dia to com­plete pur­chases into un­ver­i­fied projects.

Be­ing sta­tioned abroad, they were un­able to fol­low up with these de­vel­op­ers, who cagily re­fused to an­swer to any­body but the of­fi­cial pur­chasers. For such play­ers, there was ev­ery­thing to win and very lit­tle to lose in an un­reg­u­lated mar­ket. How­ever, this sce­nario is chang­ing rapidly and per­cep­ti­bly.

THINGS ARE CHANG­ING...

Here is a good ex­am­ple of how In­dia’s im­prov­ing Ease of Do­ing Busi­ness rank­ing is not just an ab­stract qual­i­fier but ac­tu­ally per­co­lates down to the com­mon man. With RERA and GST now in force, the po­ten­tial for han­ky­panky by un­scrupu­lous de­vel­op­ers and bro­kers has been dras­ti­cally re­duced. Con­se­quently, con­fi­dence in the real es­tate mar­ket is also im­prov­ing – not yet enough to sig­nal a re­vival, but enough to in­di­cate that the tide is slowly turn­ing.

Of course, NRIs (or, for that mat­ter, res­i­dent home­buy­ers) can still fall prey to hype not borne out by fact. Mis­lead­ing in­for­ma­tion re­sult­ing in cat­a­strophic pur­chase de­ci­sions can and do con­tinue to hap­pen. This is be­cause in many states RERA, in its present form, is ei­ther nonex­is­tent a pale shade of what it was in­tended to be.

How­ever, with many other states hav­ing adopted RERA strictly and the Cen­tre gun­ning for undi­luted na­tion­wide adop­tion of this key reg­u­la­tory re­form, the scope of such mishaps has re­duced and will re­duce fur­ther. This is also borne out by ANAROCK’s con­sumer sur­vey, which af­firms the re­in­stated con­fi­dence of more than 95% NRIsw hon ow seethe In­dian real es­tate mar­ket as more trans­par­ent, dis­ci­plined and ac­count­able.

For an in­creas­ing num­ber of NRIs, re­turn­ing home may no longer be just a choice but a com­pul­sion. Trump’s in­creas­ingly hard-line work visa and im­mi­gra­tion poli­cies are caus­ing many NRIs who had long-term plans for the land of op­por­tu­nity to have to con­sider re­turn­ing to In­dia.

On the re­bound from the soured Amer­i­can dream, many have grav­i­tated to­wards coun­tries like Canada, New Zealand and Aus­tralia. How­ever, not a few of them are dis­cov­er­ing that their ca­reer prospects in these coun­tries are far from stel­lar.

Ac­cord­ing to the web­site Non­Res­i­dent In­di­ans On­line (www.nriol.com) there are cur­rently more than 3 mil­lion In­dian na­tion­als in the United States, and 1.2 mil­lion In­di­ans liv­ing in Canada. The num­bers are not gran­u­lar enough to con­vey how many of these In­di­ans are well-en­trenched and how many are more re­cent arrivals.

How many In­di­ans will re­turn to In­dia un­der ca­reer or pol­icy duress is a mat­ter of con­jec­ture at best.

That said, how­ever many do re­turn, it will have an im­pact on the de­mand for real es­tate in In­dia. There has al­ready been a nearly 15-20% surge in se­ri­ous NRI-spe­cific in­quiries for prop­er­ties in In­dia over the last one year.

For­tu­nately for such NRIs, prop­erty prices in In­dia are still floun­der­ing from the com­bined on­slaught of dis­rup­tive Gov­ern­ment poli­cies and the fund­ing cri­sis. There has prob­a­bly never been a bet­ter time for res­i­dent or non-res­i­dent In­di­ans to buy a home in In­dia. SOMEADVICEFOR NRIS NRIs should be aware that they may­havelo­stat least some­touch with the ground re­al­i­ties back home. The mar­ket here is cur­rently in an ex­treme state of flux, and it is hard to keep track of all the changes from across the borders. As be­fore, NRIs should not be en­ticed by on­line ad­ver­tise­ments or projects overtly mar­keted at an NRI au­di­ence. To gauge the fac­tors that give value to a home in a par­tic­u­lar In­dian city, tak­ing feed­back from a re­puted prop­erty con­sul­tants is a must. For pure in­vest­ment, NRIs should con­cen­trate on Grade A com­mer­cial prop­er­ties or well-lo­cated, mid-range res­i­den­tial projects by es­tab­lished de­vel­op­ers. For res­i­den­tial plays, NRIs should give pref­er­ence to ready-to-move op­tions as they will save on GST and si­mul­ta­ne­ously cir­cum­vent the risk that comes bun­dled with sev­eral un­der-con­struc­tion (or merely ‘planned’) projects. Re­gard­less of RERA im­ple­men­ta­tion, a lot of the un­der-con­struc­tion stock is ei­ther out­side the am­bit of RERA, will take a long time to com­plete or, in the worst cases, re­main stuck in limbo. NRIs opt­ing for un­der-con­struc­tion projects are ad­vised to re­strict their search perime­ter to the big­gest, best-cap­i­tal­ized and most diver­si­fied de­vel­op­ers with im­pec­ca­ble com­ple­tion track records.

THE FLIP SIDE - IN­DI­ANS BUYINGPROPERTY ABROAD

The trend of In­di­ans buy­ing prop­er­ties abroad is more than a cou­ple of decades old, but the in­ter­est in such ac­qui­si­tions keeps fluc­tu­at­ing with the In­dian econ­omy (which has a fairly di­rect cor­re­la­tion to pur­chas­ing power), job prospects and fam­ily pres­ence in the tar­get coun­try, and the coun­try’s chang­ing im­mi­gra­tion laws.

As such, defin­ing a track­able trend is nigh im­pos­si­ble as it de­pends too much on ex­ter­nal fac­tors. That said, many in­vestors will elect to buy a prop­erty in a cer­tain coun­try if its prop­erty mar­ket sees a down­turn and prices be­come at­trac­tive. We had seen this hap­pen­ing dur­ing the US sub­prime cri­sis, and more lately dur­ing the Brexit angst in the UK.

As of to­day, a con­sid­er­able num­ber of young In­di­ans from the en­trepreneurial set, the nou­veau riche, those with set­tled fam­i­lies abroad, and those with up­com­ing or ex­ist­ing busi­ness in­ter­ests in a cer­tain coun­try will con­sider buy­ing a prop­erty there. The slow-mov­ing In­dian real es­tate mar­ket has also pushed a not-in­con­sid­er­able num­ber of In­di­ans to con­sider prop­erty in­vest­ment out­side the coun­try.

While we don’t have ac­cess to prop­erty pur­chase reg­is­tra­tions abroad, the num­bers would be fairly steady with at least some in­crease year-on-year. The relaxed RBI norms for out­ward re­mit­tances also lure In­di­ans to con­sider in­vest­ing in prop­er­ties abroad. In 2015, RBI dou­bled the Lib­er­alised Re­mit­tance Scheme (LRS) for res­i­dent in­di­vid­u­als to $2,50,000 an­nu­ally.

The key rea­sons for In­di­ans look­ing be­yond In­dia for prop­erty are in­vest­ment, the as­pi­ra­tion of hav­ing a sec­ond home there, se­ri­ous plans to em­i­grate, and for self-use due to busi­ness in­ter­ests. Many In­di­ans to­day send their chil­dren abroad for stud­ies and may even­tu­ally con­sider buy­ing a prop­erty in the con­cerned coun­try - sub­ject, of course, to the ex­ist­ing im­mi­gra­tion laws. De­pend­ing on their pur­chas­ing power, ob­jec­tives and plans in the tar­get coun­try, In­di­ans may opt for af­ford­able hous­ing in the out­skirts of main cities, com­pact of­fice-cum-res­i­dences closer to the city cen­tres or – in the case of the very wealthy – con­dos and town­houses in the most as­pi­ra­tional neigh­bour­hoods. Lon­don, Dubai, Sin­ga­pore and Aus­tralia have been more or less peren­nial favourites for In­di­ans in­ter­ested in buy­ing real es­tate in for­eign coun­tries. There is also ev­i­dence of in­creas­ing in­ter­est in Sri Lanka – specif­i­cally in Colombo – and some other Mid­dleEastern coun­tries. While ma­jor Amer­i­can cities like New York and New Jersey also num­bered among the favourite des­ti­na­tions, they don’t re­ally qual­ify any­more ex­cept for those who can in­vest at least $1 mil­lion, gen­er­ate a cer­tain num­ber of jobs there and thereby qual­ify for per­ma­nent green cards.

DOES IT MAKE SENSE?

It de­pends. Own­ing a prop­erty abroad is def­i­nitely a highly as­pi­ra­tional con­cept and can also yield good re­turns on in­vest­ment. It makes com­plete sense for those who al­ready have fam­ily or busi­ness in­ter­ests in a cer­tain coun­try. How­ever, end-users can only re­ally ben­e­fit from a prop­erty abroad if they stand a good chance of ob­tain­ing cit­i­zen­ship or at the very least res­i­den­tial sta­tus there.

As a pure in­vest­ment, it can a risky propo­si­tion for res­i­dent In­di­ans. Much de­pends on how well the mar­ket there works for ab­sen­tee land­lords in gen­eral and for­eign ab­sen­tee land­lords in par­tic­u­lar. And again, chang­ing im­mi­gra­tion and prop­erty own­er­ship laws in a coun­try can im­pact the over­all vi­a­bil­ity of the in­vest­ment. To il­lus­trate, one can­not pre­dict with any de­gree of cer­tainty how such mat­ters will swing in the United States or the UK. Also, de­spite the in­creased out­ward re­mit­tance ceil­ing, the RBI still lim­its the amount of money an in­di­vid­ual can in­vest abroad ev­ery year (though the limit ef­fec­tively dou­bles if a cou­ple pools their in­di­vid­ual in­vest­ment ceil­ings). More­over, a for­eign-shored prop­erty bought by an In­dian cou­ple can be­come a ma­jor le­gal com­pli­ca­tion if they de­cide to separate.

Fi­nally, it does still come down to pur­chas­ing power. Hous­ing rates in Lon­don, New York or cen­tral Sin­ga­pore are com­pa­ra­ble to ul­tra-lux­ury hous­ing­prices in­SouthMum­bai or cen­tral Delhi (priced be­yond Rs. 15-25 crores). Of late, some res­i­den­tial projects in Dubai have come into more or less the same price range as those pre­vail­ing for up­per-mid-in­come projects in Pune, Ban­ga­lore and the sub­urbs of Mum­bai and Na vi Mum­bai (priced above Rs. 2-3 crores). While the cheaper far sub­urbs of most cities are op­tions, the vi­a­bil­ity of buy­ing into them would de­pend on how well in­tra-city com­mut­ing works there. All this re­quires a fairly sound un­der­stand­ing of the for­eign city of in­ter­est. Like in the case of NRIs look­ing at buy­ing prop­er­ties in In­dia, the lack of such knowl­edge could re­sult in a dis­as­trous pur­chase de­ci­sion.

NRIS SHOULD NOT BE EN­TICED BY ON­LINE AD­VER­TISE­MENTS OR PROJECTS OVERTLY TAR­GETED AT THEM

MINT/FILE

n Real es­tate con­tin­ues to the favourite in­vest­ment op­tion in In­dia for most NRIs